High-grade Ni-Cu-Pt-Pd-Au-Ag-Rh-Cr-V discoveries in the "Ring of Fire" NI 43-101 Update (March 2011): 11.0 Mt @ 1.78% Ni, 0.98% Cu, 0.99 gpt Pt and 3.41 gpt Pd and 0.20 gpt Au (M&I) / 9.0 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inf.)
- Institutions, especially those investing for the arbitrage premium (short term gain due to high upward volatility during the offer/counter-offer phase of this takeover play), seem to be leaning strongly towards Noront's bid. Expressly stated, or implied, there is more upside potential yet to come from Consolidated Noront than from Cliffs, even with the cash-flow projections from the chromite project.
- The warrant valuations are indeed quite variable, depending on the assumptions being used. One caller had them at 0.14-.17/share. That's not too far below Noront's suggested valuation. One of the most critical factors to consider in those valuation metrics is the assumption base for the calculations. The effect of share price volatility for example, but also the term of the warrant (five years, in this instance). Institutional investors appear to be seeing this warrant as a significant inducement, as an increase in Noront SP will have an exponential effect on the value of this warrant. Althought Cliffs' public statement that the warrant may have zero value is technically correct, it also may have extraordinary value, going forward. Kind of like blue-sky squared (blue-sky times blue-sky).
- Institutional investors also know the implicit value of tax deferral. Keeping your capital in your hands for as long as possible is part of the game experienced investors play with the tax man. The longer you have the money pre-tax, the more money it can make for you. Cliffs verified that their offer did not permit tax-free rollover, as stated by Noront. Quibbling over the implications of that issue is all they had, given that the basic fact expressed by Noront is correct.
- Cliffs acknowledged that the market and investors in general did not value New Freewest at anywhere near 0.15/share, and thus they dropped it from their latest offer. Mac seemed quite okay with that idea.
- Cliffs plans to supply the HC (high carbon) ferrochrome market, as the LC (low carbon) ferrochrome market is essentially a niche within a niche. I take it, then, that coke will indeed be a requirement for the new smelter.
- Cliffs acknowledged the uncertainty in their timeline (production by 2015), but maintained that environmental permitting and First Nations' agreements could be in place within 2 years. I believe that is a very optimistic timeline.
- Cliffs thinks that they will have no trouble handling the hydrological (water infiltration) issues of an open pit mine. That is a rather confident prediction, given that they have nothing beyond preliminary engineering data upon which to base that conclusion. They haven't yet done a scoping study, and already they're predicting a positive feasibility outcome.
- Rail infrastructure ball-parked in the $0.5-0.7 billion range. No evidence of by whom or how it will be financed.
Lar
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